“Wage Pressures,” “Robust Wage Growth,” “Wage Inflation,” even “Wage War” Plastered All Over Fed’s Beige Book

Wages are heating up. And it’s also now starting to show up in the data: The wage component in the fuel for persistent big inflation.

By Wolf Richter for WOLF STREET.

The Fed’s “Beige Book” – an informal narrative of the economy as depicted by large and small companies in the 12 Federal Reserve districts – listed 78 references to various aspects of strong wage pressures and bonus offers to hire and retain workers, amid concerns of “wage inflation,” with some colorful descriptions of how even sharply higher wages (+20%) sometimes fail to attract enough workers, even if it maxes out the business model.

By comparison, in the January Beige Book contained only 15 references, compared to 78 in October, but some wage pressures already cropped up, focused mostly on bonuses and some pressures to raise wages.

And there was even an instant classic from the San Francisco Fed, namely the “wage war.”

“Wage growth climbed further due to intensified competition for talent and workers’ willingness to switch jobs, with one contact from the banking sector characterizing it as a wage war,” the Beige Book from the San Francisco Fed said.

“Apart from increasing starting salaries as much as 20 percent by some employers’ estimates, most contacts across sectors reported offering hiring bonuses, gift cards, and other incentives,” it said.

Here are the standouts for January and October. To be included, a reference has to have a strong qualifier of some sort – “slight wage increases” doesn’t cut it. The two columns on the right show the number of times these types of references occurred in the Beige Books of January and October:

Wage pressure references and how often they occurred Jan. Oct.
offer retention bonuses, hiring bonuses, signing bonuses, general bonuses, stay-on bonuses, 7 11
wage pressures, pressure on wages: strong, upward, remained high, rising, increased, intensified 4 9
raise wages, raised wages, raise wage offers, give raises, raising wages 0 8
wage increase, wages increased: sizeable, preemptive; “Multiple contacts cited entry-level wage increases of 15 to 20 percent”; “agriculture employer reported that a 20% wage increase still left them with significantly fewer workers than they wanted” 0 6
higher wages, wages were higher: “higher wages were not always attracting more applicants.” 0 6
wage growth: strong, robust, highly elevated, climbed further 0 5
wages were on the rise, wages continued to rise, increase strongly, moderately 0 5
offer perks: “flexible work hours”; “flexible work arrangements”; “non-wage perks”; more vacation, nonmonetary incentives; 3 8
increasing starting wages & starting salaries 0 3
wages and prices increased strongly, continued to rise, 0 3
increased wages, increasing wages 1 2
pay: “offered higher starting pay”; “giving additional pay raises on top of regular annual increases to retain their existing workforce”; “using more premium pay for temporary workers as they sought to offset labor shortages” 0 3
wage war: “intensified competition for talent and workers’ willingness to switch jobs, with one contact from the banking sector characterizing it as a wage war” 0 1
wages and price levels climbed 0 1
wage and price growth remained highly elevated 0 1
high asking wages: “did not hire applicants because asking wages were higher than their business models could support” 0 1
“wages were on the rise for existing workers as well” 0 1
“heightened competition for workers pushed wages up” 0 1
“concerned over … wage inflation” 0 1
compensation: “many firms reportedly enhanced other parts of compensation (such as health insurance, tuition reimbursement, and time off) to attract and retain workers”; “workers shifting sectors to pursue higher compensation and preferred working conditions… 0 2
Total number wage pressure references 15 78

Some of these wage pressures started to show up in the data:

Over the past six months (April through September), the average hourly earnings of all private-sector employees increased by 2.9%, which amounts to an annualized rate of 5.8%, according to Bureau of Labor Statistics data.

In September alone, the average hourly wage jumped by 0.62% from August, which would be an annualized rate of 7.4%.

This outpaced the increases over the prior six months (October 2020 through March 2021), when the average hourly earnings rose by only 1.6%, for an annualized rate of 3.2%.

The past few months show that wage increases are heating up and are starting to filter into the wage data. If these wage increases continue on this track – the Beige Book indicates that they have a good chance of doing so – the wage component in the fuel for persistent inflation would be in place.

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  148 comments for ““Wage Pressures,” “Robust Wage Growth,” “Wage Inflation,” even “Wage War” Plastered All Over Fed’s Beige Book

  1. Depth Charge says:

    The FED has become too powerful, too impactful, too much a part of the economy. They have destroyed the free market and had an extremely detrimental effect on society. END THE FED.

    • 2banana says:

      Free money out the wazoo to create even more and more government programs to buy more and more votes…

      The FED ain’t going anywhere.

    • historicus says:

      Depth
      1000 +s

      They have been in constant violation of at least two of their three mandates…..and not a word from those involved in oversight
      Taxation via promoted inflation…..subsidizing federal debt creation with immoderately low, historical record low long term interest rates.

    • Mark says:

      Oh yes End The Fed End The Fed End The Fed

      And consider prosecuting the private, non-federal bankers for counterfeiting and currency debasement. For basically ruining the country.

      If Bill Cosby can go to jail- why shouldn’t Greenspan, Bernanke,Yellen, and Weimar Boy Powell be there as well? They ruined an entire nation, not just some individuals.

    • Wonderful news!

      Labour is getting a bigger piece of the pie!

      FED is doing a wonderful job accomplishing exactly that!

      Expansionary fiscal policy just the sweet icing.

      Chick Little worries of inflation the only real risk.

      The economy will adjust but it takes time.

      • Wisdom Seeker says:

        Re: “Labour is getting a bigger piece of the pie!”

        Need more evidence. Could be labor’s just struggling to keep up.

        If prices rise faster than wages, labor’s slice of the pie will look larger yet feel a lot smaller.

  2. 2banana says:

    Automation to accelerate its penetration into the economy – especially the service industry.

  3. The Wealth Effect is a Ponzi Scheme says:

    S&P 5100 by February 14th 2022. Bitcoin 79,000.

  4. Xavier Caveat says:

    Never really thought of the Fed as a bunch of ‘new wage’ types, i’m thinking J-Pow! consults crystals and plays a mean Ouija, er Fed board.

    • BuySome says:

      Must be dilithium crystals…he needs ’em to push inflation beyond warp 9, whip us around the sun, and take a trip into the past….stone age, that is….movie stars, swimmin’ pools. Ya all come back now, hear?

      • Phil says:

        More like Meth crystals!

        • Phil says:

          You always need more and more! And where does that get you? In prison, if you’re lucky, toothless and on the street if you are unlucky!

        • polecat says:

          ‘Ahem’ .. I believe it’s proper moniker is referred as ‘Fedanyl’ ..

          They shoot-up insider trading, don’t they ..

  5. Kentucky says:

    The pandemic and subsequent stimulus money woke the pink elephant in the room. The truth is our homes and $12.99 enchilada plates have been built on the backs of an Anerican caste system with cheap labor. Those illegal immigrants that didn’t get PPP money went back home (i.e. Mexico) because they had no incentive to stay is the US. Thus the shrinking labor pool. Less workers means tighter labor pool and higher wages. The so called “living wage” simply means a person lives paycheck to paycheck. There is no saving for retirement and God forbid putting some extra cash into a 529 plan – ha!

    The bottom line: We want our conveniences and cheap food and cheap products. It’s a race to the bottom. The solution: Get off our lazy and selfish asses and make a difference in our communities. Quit being selfish and cede some f’ing privilege. Pay $24 plus tip for the Tex-Mex enchilada plate so the server and dishwasher can make a prosperity wage and not just “get by.” That’s assuming the restaurant owner won’t hoard the new found gross profits. We are great a pointing out problems but turn a blind eye to fixing them.

    Rant over.

    • 2banana says:

      Illegal immigrants heading back home in a reverse mass migration?

      $24 for an enchilada?

      I have had good whiskey and I have bad whiskey but none like this…

      • Kentucky says:

        I bet your good whiskey was made by illegal immigrants or cheap labor. Cheers!

        • Nacho Bigly Libre says:

          What’s the rationale for supporting illegal immigration?

          If cheap labor is necessary, why not increase the number of visas?

          With the current system, even when I am ready to pay $25 for an enchilada, the job will still go to the guy without papers who will work for less than $10/hr.

        • Russell says:

          Close the borders and put the unemployed to work. Why pay others to do the work for us and pay our own to sit at home and watch Oprah? The net cost should be an overall benefit; higher wages for low-skill work but lower taxes since we aren’t paying for the local lazies.

        • Trailer Trash says:

          Many business managers prefer undocumented workers because they are docile. One call to El Migra and the troublemaker is soon deported. Undocumented workers means no unions and their insistence on nondiscriminatory procedures, treating workers fairly, and so on.

          It’s not about wages so much as it is control over the workplace like breaks, the pace of work, work schedules, promotions and plenty more.

          Bosses can always find a way to get rid of or drive out troublemakers, but obviously prefer to hire workers who are unlikely to ever cause any kind of disturbance. Undocumented workers and immigrant workers with special visas are guaranteed to be compliant no matter how outrageous their treatment. For that reason the current chaotic labor systems are unlikely to change any time soon.

      • BuySome says:

        This is what I love about this new economy..we’re all reduced to arguing over the value of a wet chicken sandwich. Meanwhile, the boss men are eating our lunch and asking if we can spare a beer to wash it down. If we say no they’ll declare it to be a failure to communicate and send us off to the cooler.

    • Paulo says:

      It isn’t just wages. The past 2 years many many people have acted like total shits towards workers just doing their jobs, in particular frontline grocery store clerks. My sister in law runs the front end at a large chain grocery store. The staff are underpaid, short help as every case of every sniffle means 3 days off and a test, and many customers are rude. In fact, she has had to break up in store fist fights this past year between customers, and every week or so anti vaxxers skulk around putting up posters in the aisles. We’re 89% vaccinated here as of now, but a good portion of the remaining 11% make service workers employment a living hell. One lady just walked off work, mid shift. Her parting comment? “There isn’t enough money anywhere to get me to do this job for one more minute”.

      Working with the public is hard, particularly the entitled whiny public of today. Nice to see limits and consequences.

      The best quit ever was when ATC was backed up all over Hell’s half acre several years ago. Planes were waiting on the tarmac for hours….for a take off slot. I remember one pilot, at Denver I believe, finally had enough. He shut ‘er down and deployed the emergency exit to jump out of the jet and walk away.

      They’ll clamp down on workers pretty soon. Interest rate rise and recession if they have to, but there is no way companies will let workers get out ahead if they can help it….at least for common Joe workers. It’s a class system out there, big time.

      • DawnsEarlyLight says:

        Paulo, very good comments. Felt close to home, and very personable.

      • Felix_47 says:

        In California outside of health care, legal and finance and the grocery stores (which are unionized), and places that require bonding like an AM/PM, and government contracting (mostly limited to minority owners) most everyone else is an illegal. And from what I can see the migrant wave is just beginning. In my field, construction, you cannot make a profit without 10 dollar per hour labor. And to keep it away from my books we subcontract everything to Mexicans who directly hire the labor. Most of my labor comes from a few villages in Michoacan. When we need more workers my foremen put the call in down there and in a week they are here. They buy one worker’s comp policy for ten workers and if something happens they are told what name to use. If it is bad they just BK and it gets dropped on the uninsured employers fund. And because of this those villages in Michoacan have sprouted real houses, satellite TV, cars, appliances and relative prosperity since a lot of money gets sent home. And while once people came to make it in America they now come, want to make money, get their babies born here as an anchor, and go back to their native lands where they can have a higher standard of living when they hit 50. Even in Mexico the standard of living is higher for a given amount of money. Even health care is better and free. And Mexico does not have a huge minority population needing billions in support nor a ridiculous losing war machine. Corruption they have and narco problems they have and much of it comes from the US and our burgeoning market for illegal drugs. As long as we have an open border I see little wage inflation ahead for the bulk of employers…..the roofers, the small contractors, the auto repair shops, the gardeners, the restaurant workers (except for the white front end servers). The FIRE and MEDLEGAL industries will prosper since they control the laws and the government. Jerome Powell front running the Fed is typical. I wonder why he has not been immediately fired for that alone. I would fire one of my employees if they bought a saw at Home Depot and claimed it was 89.99 but it actually was stolen. I would not trust Powell behind the counter with a cash register and cash given that behavior. Would anyone?

        • Truckman says:

          Thank you.
          Almost identical to what I saw in the UK with workers from Eastern Europe.

        • So you’re doing cross border hiring? Or are the Mexicans here, and they subcontract the offshore labor?

        • Petunia says:

          The luxury mall in Monterey, Mexico is nicer than most in the southern US, all the high end stores are there. Those illegals are sending a lot of money home.

        • Kurtismayfield says:

          “In my field, construction, you cannot make a profit without 10 dollar per hour labor. ”

          Maybe the industry doesn’t deserve to exist if they pay people that little.

      • drifterprof says:

        Paulo – very good description of an issue related to the “shortage of labor.” There seems to be a lot of articles coming out on reasons why there is this “shortage.” I haven’t read many of them, so don’t know if they describe the 2-cents worth I sometimes focus on:

        All the way from my first job to retirement, roughly 4 out of 5 managers I worked under were AHs, political enforcers, weird power trippers, or some other kind of douche bag. This includes bosses on jobs from busboy at a pancake restaurant to Ph.D. instructor at universities.

        Basically, for me, American management has been worse toxically than managers in authoritarian or quasi-democratic countries where I’ve worked.

        So with the new generations coming along, perhaps taking that stressful crapola in a toxic environment just isn’t in their mindset.

        • VintageVNvet says:

          Gotta say ”almost” the opposite for my 60+ years in the construction industry, with a couple of folks, OK, guys, as you describe drifty:
          Started with older and actually old guys, black and white, clearly doing their best to ”mentor” me as a teen in FL, and then similar after USN, in CA…
          YES, far damn shore, they wanted me to WORK,,, which I really loved to do then and even now when definitely much more ”fragile and feeble.”
          Sure, a couple of ass holes along the way, who I quit ASAP, and was not quiet about why…
          Miss the old guys,,, and try to put them and their wonderful efforts into every recent ”contractor” work.
          OLD old ”meme” :: if you run into one ass a day, ”they” are the ass,,, if you run into many asses a day, maybe YOU are the ass, or something like that, eh

        • drifterprof says:

          VVN:

          It could very well be that I am the AH. Some people have said so along the way. Sad for me since if I was aware of it, could have used it better to clime the ladder.

    • Old School says:

      You spend your earnings the way you want and I will do the same.

    • COWG says:

      Kentucky,

      You first….

    • Djreef says:

      Hell, We’re already doing that. Have you seen the prices of restaurant food, lately?

    • robert says:

      I will pay double for an enchilada if I can pay next week.

  6. Tom S. says:

    I recall hearing “slack in the labor market” about a million times earlier this year, glad that one’s been retired in favor of rising wages. Thank the technocrats for fixing that problem. On the edge of my seat waiting to see how they fix “transutory” inflation.

  7. SOL says:

    The rich get richer. The poor get richer. The middle class stands still while their dollars shrink.

    The Working Poor aren’t happy.

    • josap says:

      The poor get to buy new shoes for the kid rather than thrift store shoes.

      • Djreef says:

        Hey I bought thrift store shoes last month at the Goodwill. Brand new pair of never used Nike Frees.

        🤑

        • crazytown says:

          Yeah but now you have to wear Nike shoes 🤢

        • COWG says:

          Should be Nike “ freeze”…

          Isn’t that what the guy with the gun says right before he steals them from you…

    • roddy6667 says:

      The American middle class now has the same buying power as it did in 1967. The top 5% get richer and the poor have welfare benefits. Who pays for all this? The middle class.

      • Nacho Bigly Libre says:

        All welfare received should be valued at market rate and counted as income.

        Food, housing, transport – all discounts and subsidies need to appear on a 1099 form.

        No double dipping.

        • OutsideTheBox says:

          And capital gains should be taxed at the same rate as income.

          Also lets eliminate the carried interest giveaway to the well heeled.

          Oh yes…..lets tax high speed trading out of existence.

          Smash the offshore hiding of taxable monies.

        • Nacho Bigly Libre says:

          Yes, yes, yes and yes.

        • rankinfile says:

          and let’s tax share buy backs as dividends

      • Old School says:

        That’s close to when the big government spending started followed by the money printing and off shoring to keep the empire afloat

      • COWG says:

        It’s just the boomers wanting you to experience “ Happy Days” like they did…

      • robert says:

        That sounds like stability. For 1967 comparison just move the decimal point one place to the right but you have 10x the money to pay for it.
        For 1913, we’re almost at the point of moving it two to the right.

        “If you pass this bill, you will have created an engine of inflation’.
        -Elihu Root, debates in Congress re: creation of the Fed, 1912-13.
        Interesting guy, Nobel Prize winner (when it mattered).

    • historicus says:

      The Fed intentionally punishes savers….
      they promote inflation and peg interest rates well below those levels.

      saving has been an available avenue for people to get on their financial feet…..but now it is punished. This is UnAmerican, IMO.

      • Old School says:

        They can only do it for so long before people start saving in alternates. I think they will have to put the squeeze on holding gold before it’s over with.

  8. The Bob Who Cried Wolf says:

    We gave retention raises back in August. You could see this coming a mile away. It’s only going to get worse and I fully expect more raises this December or January. Gonna be quite the red pill moment on so much of the country that blindly followed along. They have no idea what has happened, why it happened, what’s still going to happen, and the pain it’ll put on almost everyone to correct. I’d go into my conspiracy theories but I’d most certainly get moderated. A lot of what the “fringe” folks like myself said a year ago is playing out now. I hope this ends well.

    • Old School says:

      I don’t think Wall Street likes a functioning economy with low leverage. They make money being the fast money crowd on volatility.

  9. Rowen says:

    A labor problem that’s starting to percolate but will get much worse. So many of the sub-50 year olds workers won’t be able to work as long as previous generations. Diabetes gonna hit this cohort hard. Obesity rates ~45%, overweight ~70%. I know so many guys who can barely breathe in their 60s.

    • drifterprof says:

      Maybe there will be a lot of supplementary income jobs for us healthy older folk on Social Security – keeping those physical failures hooked up to their breathing and feeding tubes.

      Or maybe AI robots will do that.

  10. MCH says:

    People wonder why cryptos (even shitcoins) are gaining traction. what does one expect when the morons running the country go ahead and inflates to infinity and beyond.

    The supply chain problem just makes things worse. Part of it can be traced back to the last administrations China sanctions, specifically the entities list that targeted all of those companies. Of course, being the US, nothing can be done right without wasting years, years in which companies like Huawei massively overstocked their chip supplies. This of course got noticed by companies like Apple, and then the race was on the screw over the supply chain.

    Covid obviously didn’t help, now it’s like a total death spiral.

    And what do you do except go ahead and join the party. I wonder how much coffee beans are stock piled by Starbucks in humidity controlled environments. There is stockpiling of uranium by ETFs, and who knows what else gets to be stockpiled. It’s just insanity.

    The labor problem is going to be ongoing, until all this nutiness goes out of the system. Good luck letting that happen. Cause the guy who tries to kill this, will effectively suicide his political career. I just don’t see that kind of moral fortitude today from our leaders.

    • JoAnn Leichliter says:

      Average annual wage may have increased, but didn’t I just read that blue collar income actually declined in September?

    • Petunia says:

      It wasn’t China that impose regulations on trucks being newer than 2010 and raised the insurance requirements on truckers. That was California.

      • Wolf Richter says:

        Petunia,

        The law went into effect on Jan 1, 2020, BEFORE the pandemic, nearly 2 years ago!! There were no problems then with it.

        Only 2009 model year and older trucks are not compliant. 12 years is old for trucks that crisscross the country every day, that’s lots of miles. The industry had lots of time to adjust, and it did adjust.

        Then some moron with an agenda wakes up and writes a nonsense clickbait article that lights up the internet, and suddenly all the problems are due to the change in the law on Jan 1, 2020.

        There are container terminals further up on the West Coast, and all along Texas, Louisiana, Florida, and up the Atlantic Coast, and the Panama Canal is open and wider than it used to be. All major container terminals are having problems.

        A few months ago, it was railroads that caused the biggest issue at the port of LA when their rail yards in other states (Chicago, Memphis, etc.) were backed up and they stopped accepting containers at the Port of LA for a week at a time, which triggered a huge pileup of ships and containers.

        Driver shortages are REAL.

        I cannot believe how one nonsense piece lights up the internet like this with a clickbait title – which is the only thing people read – that was then picked up around the internet by all kinds of other publications, and that then gets stuffed over and over again into these comments here and into my inbox. People really love clickbait. That’s how it works.

  11. cas127 says:

    “Over the past six months (April through September), the average hourly earnings of all private-sector employees increased by 2.9%, which amounts to an annualized rate of 5.8%, according to Bureau of Labor Statistics data.”

    When the DC political class says things like this, every American’s immediate first instinct should be to pin the DC’er down and require crystal clear clarification.

    (Otherwise, “depends upon what the meaning of is, is” becomes std operating procedure).

    From a macro perspective, I find it pretty hard to believe that a 2.9% wage increase over the last six months is somehow firing inflation, considering that there are still 6 million fewer people working now, compared to Feb 2020…when inflation wasn’t being fired up. Being *further* away from full employment doesn’t spike inflation.

    (F’ed up supply chains do.)

    Is that 2.9% increase from the bottom of a Covid wage blast crater? Is the 2.9% increase only for the *employed* or is it an increase in national aggregated wages? (the latter reflects aggregate employment levels while the former does not…and only aggregated wage levels are going to drive squat).

    DC excels in word games designed to spotlight designated villains.

    • Wolf Richter says:

      cas127,

      It’s not “firing up inflation,” as you said. It’s “the wage component in the fuel for persistent big inflation,” as I said, very carefully.

      The official contention has been that this inflation is temporary because of x,y, and z reasons, including that wages aren’t there to support it. Now the wages are there to support it. That’s what the data is saying, and that’s what I am saying.

    • Petunia says:

      Cas127,

      What’s causing the inflation is the instability that is everywhere. While the craziness continues, people get scared and act accordingly.

      I think bitcoin is a scam, but I do think the current environment is helping to bolster it as an asset class. It’s the one thing people can point to that supposedly isn’t associated with the established systems.

      The boat is sinking and people know it.

      • Old School says:

        I hear crypto already has lobbyists “education” our representatives does in DC so who knows.

        It’s very clever in some ways. Create a new asset class and in you can persuade the world to put 1% of their assets in it you are several $trillion.

        • LK says:

          Pretty much this. Anyone pimping crypto isn’t doing it out of some progressive, utopian ideal regarding currency or what have you. It isn’t because the technology represents the future.

          No, they are advocating for crypto because they are already invested and more adopters raises the value of their portfolio. Any futurist should be appalled at this cynical attempt to bilk people.

      • Auldyin says:

        @P
        “What’s causing the inflation is the instability that is everywhere.”
        IMO it’s dangerous to lose sight of QE as being the fundamental cause of inflation by increasing money demand beyond the natural level that the productive capacity of the economy can sustain.
        Believing anything else, can allow ‘Them’ to get off the hook and start fights amongst others, eg employers v workers or customers v retailers etc. Divide and conquer.
        Screw ‘Them’ keep the blame where it is and demand wages higher than inflation otherwise you are a loser.

        • Petunia says:

          There is no fundamental reason for inflation. The middle class is disappearing in this country, we should be seeing deflation. The median income is $34K, which translates into half the country barely surviving. They can barely afford Walmart, they don’t have the means to feed inflation.

          The fed has a role in the current situation, but they have been trying to cause inflation for a decade, without much success.

          The inflation now is being caused by fear. People can see the dysfunction everywhere, govt, society, and business. Nothing functions well anymore because the dysfunction is structural, bad govt, bad policy, bad leadership everywhere.

  12. SpencerG says:

    Here are the Five Reasons that Jerome Powell laid out for his belief that inflation is “transitory” (from his Jackson Hole speech way back in August):

    -Lack of broad-based pressures;
    -lower moves in high-inflation items;
    -low wage pressures;
    -tepid inflation expectations,
    -long-lasting forces that have kept inflation low globally.

    in an article today, CNBC had a snarky comment about this list of reasons supporting Powell’s view that the current run of high inflation will go away… “So far, they aren’t holding up very well.”

    • Depth Charge says:

      Yet Weimar Boy Powell is still pumping at 100%, his foot pressing the accelerator to the floorboard as hard as possible. Remember when he said he was “going to let inflation run hot?” Yeah, this evil SOB is doing just that. He’s backing up a tanker truck of gasoline to an inferno.

    • historicus says:

      Powell also said …unemployment was due to
      COVID fears
      People looking for better jobs
      Childcare issues
      and THUS he concludes interest rates must stay near zero

      Not one of these listed causes are solved by low interest rates….
      He is disingenuous and intellectually dishonest.

      Oh, and there are record job openings……square that circle Jay

  13. Ole C G Olesen says:

    The DATA are WISHFULL THINKING and SMOKE-SCREENS in order to give an impression things are OK and to keep the Populace at bay .. NOTHING MORE and NOTHING LESS

  14. Mark says:

    The fed has been printing to support congress’s drunken spending for over 30 years now. Why so little inflation until now? Outsourcing + immigration + automation kept wages low.

    Unfortunately today’s wage trends will be broken by more outsourcing, innovation and automation. It will take another year or two for the supply chain to heal after the disastrous pandemic management. Lockdowns, mandates and closed borders is chaos in a just in time world.

    BTW, this is the reason the wage gap between CEO and worker is so enormous. They reward themselves for forcing down wages by massively overpaying themselves.

  15. topcat says:

    I will re-post this comment as it is relevant here.

    “WASHINGTON, Aug 26 (Reuters) – U.S. corporate profits surged to a fresh record high in the second quarter, boosted by robust demand and higher prices,”

    There is no need for companies to pass on wage rises to consumers in the form of higher prices, they can just live with lower profits – this is just a re-balancing of the profit share between capital and labour that is way way overdue in the USA.

  16. Beardawg says:

    Well if inflation is here to stay, I am glad worker wages are part of it. If not, then revolution would be in the air.

  17. CJH says:

    The systems are too concentrated and the FIRE sectors are sucking up all the rents and interest. Competition needs to be resurrected by busting monopolies and infrastructures need to be modernized. Unfortunately, the Republican Party is opposed to all of it.

  18. SocalJim says:

    The generational divide on inflation is remarkable.

    The above 40 crowd is pouring money into real estate for an inflation hedge. In contrast, the under 40 crowd is pouring their money into Bitcoin. And, the 70+ age group wants gold and silver.

    In my opinion, Bitcoin is a dumb move.

    • Old School says:

      Four good things about precious metals:

      1. Cost to hold is zero for average person
      2. Outside financial system and survives system failure
      3. Been money for thousands of years
      4. No record of holding or transfer for average person

      • drifterprof says:

        It costs me to hold gold in a safe deposit box (in the United States). I haven’t seriously contemplated trying to take it on an airplane to my home in Thailand. Bad idea – too much chance of confiscation or robbery along the way.

        Not sure how I would hide it if I owned and lived on some property in the United States. Sneak out at night and bury it somewhere?

        Not sure if I would be more creative and effective in hiding than a talented thief in finding.

        • COWG says:

          dp,

          I’ll be happy to hide it for you…

          Jus’ saying… anything to help a friend…

        • cas127 says:

          The future is likely some combination of new, technological dollar alternative features (distributed ledger etc.) and old, tangible dollar alternative features (personal possession and control, etc.)

          So long as the USD is debased and abused, the development of new features/alternatives will not stop…until some combination really, really clicks and then there will be a true run on the dollar.

          The important thing isn’t any one specific dollar alternative, it is the process of seeking those alternatives and the reasons behind the search.

        • Bobber says:

          Couldn’t a thief just go in a house with a metal detector and find the stuff right away?

        • RedRaider says:

          Storing gold in a safe deposit box is a bad idea.

          1. I believe banks won’t let you store money in a box. I read this recently and was stunned. I mean, that’s the #1 reason to get a box isn’t it? I don’t know if a bank considers gold money.

          2. If the government decides to take your gold there will be someone from the government standing by watching you open the box. More likely they’ll dispense with the niceties and look themselves when the bank is closed.

          The reason why people believe in gold is because it’s off grid. I buried my gold in three different locations, took GPS readings, encoded them on a memory stick, the decoding algo on another stick and hid the two sticks in different locations.

        • Old School says:

          You have a lot of constitutional rights inside your home, so inside the home is a good place to store it. You can’t tell anyone is main security I think.

        • Depth Charge says:

          Storing anything of value in a “safe deposit box” is anything but safe. It should be reserved for paperwork only. Banks are the most crooked outfits out there.

        • drifterprof says:

          RR sez: “I believe banks won’t let you store money in a box.”

          There is no general law regulating that, although a specific bank policy may prohibit it:
          “They have not yet enacted an actual law prohibiting the storage of “money” in a safe deposit box. The problem is surfacing because of “interpretation” of laws with broad scopes.” (armstrongecononomics.com)

          “Most experienced investors agree that the bank’s safe deposit box is still one of the safest places to store gold coins or bullion.”

          I don’t have that much to get paranoid about it. If you showed me some examples of where the feds gratuitously seized individuals’ gold bullion, then maybe I’d change my strategy.

      • historicus says:

        and when you try to transfer or cash it in…
        you will have to pay to have it assayed.

        • drifterprof says:

          Maybe not if you have PAMP SUISE gold bars in original sealed packets, number printed on the bar and on the packet with the certificate assayer signature. Someone might just buy it off you.

        • 2banana says:

          Hardly.

          Take an American Eagle (gold or silver)

          A quick measure of look, dimensions, weight, magnetic and ping test.

          99.999% accurate.

          A fake at that level would cost more than the original.

          Fyi. Google Yahoo and Venezuela and gold. There is a recent article on how grams and half grams of gold are now the new currency.

      • Auldyin says:

        @OS
        Are you sure it’s Gold???

        • Old School says:

          If you live in N. America I think one oz American Eagles and Canadian Maple Leafs are the no brainer stackables.

    • I knew about bitcoin in 2009. Didn’t take it seriously enough. The assumption was that even if it could make the leap of faith the CBs would do it in, and I think they would have if they weren’t so busy with a crap economy.
      With a market cap of 3t+ it ain’t goin’ away. I relented about 6 months ago and bought in. Crypto has acquired the necessary faith, and after all, everything else economic requires faith, no?
      Buy some. Take the money.

      • Old School says:

        Bitcoin is a new speculative asset. The world has too much speculation right now, so I am not playing.

        • COWG says:

          “ Bitcoin is a new speculative asset“

          OS,

          I think divorce court will have the final say on that…eh?

      • 2banana says:

        Well, you could say the same about Tesla stock too.

        And a thousand other ideas that went bankrupt.

        Just like anyone in a casino.

      • Xavier Caveat says:

        Ever think that Bitcoin et al will be the whipping boys when the economy tanks?

        Why would Wall Street want stocks to take the blame?

        • Tom S. says:

          Yes, I agree that crypto companies will be the scapegoat and they deserve every bit of it. BTC first movers own a huge percentage of the coins and are bidding up the prices between themselves, while proclaiming BTC is the answer to inflation and government spending. Next step is slowly start to unload to the public while continuing to advertise. Now there’s even an ETF for the ponzi scheme. NFTs, about the farthest thing from real value you could invent. Just clever people proving the old adage that a sucker is born every day. If it takes down the DOW you can bet the politicians will send it right back to the deep web from where it came. Assuming the government can fund the task force to police it, of course.

        • Tom S. says:

          Just read how a bug in an institutional trader’s algorithm briefly cause an 87% plunge in BTC value on Binance at around 7:30 AM today. I’ll rest my case.

      • Depth Charge says:

        BitCON is a speculative token, like all crypto. The question I ask the BitCON people is, “why are you buying Bitcoin when other coins are outperforming it?” That’s when they tell me that BitCON’s the sh!t, and all the others are worthless. I agree with them on all the others, but unfortunately BitCON is worthless, too. Biggest scam in history. People are literally gambling on air.

      • Auldyin says:

        @MS
        I watched Max & Stace over 10yrs ago and got the ‘bitcoin’ idea straight off at about $5, $10 or something.
        I laid off it, my reasoning being, I was too old to see the benefits mature. $64k today, is that fast, or what?
        Oops! I’m still here, what bad bet did I make???
        The bet keeps getting worse now.

        • Old school says:

          Bitcoin may work out. If you know financial history it has got a lot in common with the get rich scams of the past. Financial markets can lose their mind when others start getting rich. People are the richest the day before the bubble pops.

    • Petunia says:

      SocalJim,

      The millennials have been royally screwed during their lifetimes, with student debt, unemployment, high rents, low wages, and general lack of upward mobility. They view bitcoin as a refuge from a monetary system that doesn’t work for them. I don’t blame them for jumping ship even though I think bitcoin is a scam. For millennials bitcoin is voting with your feet and money.

      I wouldn’t advise any millennial to put money in a 401K. I don’t care what the match is, because it will become a slush fund for the taxman.

      • RedRaider says:

        Do you know if self directed IRAs would get the same treatment as 401ks? The theft would be more direct but I don’t think the government would care about that.

        • Petunia says:

          I don’t think it matters if it’s 401K, IRA, or Roth. They will tax and means test the value against everything, SS, Pensions, Medicare, insurance, taxes, etc.

          This is why they are pushing so hard against bitcoin and cash, because they have to rely on voluntary compliance to know if you hold it. With everything else they have ready access to it already.

        • Beardawg says:

          Self-Directed IRA owners mostly hold real estate. Direct theft of real estate not likely. 401Ks and related IRAs more susceptible to direct theft from gubment.

        • Petunia says:

          Bear,

          You are kidding yourself if you think they won’t tax the entire value of a self directed IRA. I don’t care if it holds your Barbie Doll collection.

      • Wolf Richter says:

        Petunia,

        “The millennials have been royally screwed during their lifetimes…”

        Zuckerberg is a millennial, isn’t he? He and his millennial executives and his older and younger executives screwed untold numbers of people. Companies like Google have millennials all over their executive ranks. These people — millennials or not — need to be sent to the hoosegow for their corporate decisions, and the companies they run need to be broken up. These people are a gang of thieves and racketeers.

        • Petunia says:

          Wolf,

          The number of people you refer to is an extremely small percentage of the millennials. I am no fan of FB or Google and there are more reasons than you can imagine for locking up those guys and breaking up those companies.

        • Wolf Richter says:

          Millennials are no longer kids. They’re starting to run the show in lots of places. Biggest generation ever is taking over. I see it everywhere. Us living fossils are getting pushed out the door, one by one.

      • Auldyin says:

        @P
        If the National debt increased in your lifetime these are taxes you didn’t pay and you got to enjoy all the Govt spending on your behalf.
        Didn’t you enjoy Vietnam, Iraq, Syria, Lybia, Afganistan, etc, etc, it was all done for your benefit.
        The people who get screwed will be the ones who die with a National Debt smaller than it was when they were born due to increased taxes.
        What the Hell let’s go pivot to China so the next generation doesn’t get screwed.
        Just sayin’

  19. The Real Tony says:

    No pressure on wages in Canada. Outside of fast food jobs there are no jobs. Nurses in Alberta Canada are getting a pay cut.

    • Truckman says:

      It’s regional in Canada.
      Quebec just offered nurses an $18,000 retention/re-recruitment bonus. Atlantic Canada has Help Wanted signs everywhere, and anyone who genuinely wants workers is offered min wage + $4 at least. It’s difficult to figure out exactly why, so it’s probably a combination of a lot of reasons. I’ve been offered 3 jobs in the last month, two of which I don’t hold the certificates for but the employers know I am capable of doing. I said no to all of them, so did everyone else, and these were with half-decent employers. I’m just too busy working for myself. I save $40 an hour blocking and splitting my own firewood, and I work slow on nice days. Why would I stop doing that to travel and work for someone else at $25 an hour minus taxes, gas, yada, yada?

  20. Tony (one of them) says:

    Off topic here (sorry) but Wolf has addressed the reverse repo in the past and called the current spike as an effort to mop up excess liquidity. I see the amount is now well over 1.6T nightly. Are they still mopping up liquidity or is there a better explanation that involves conspiracy theory :-)?

    These stories of wage inflation are covering up a whole world of human misery out there, people struggling to get by on wages that just won’t get them anywhere. So it seems to me.

    • Wolf Richter says:

      They hit $1.6 trillion only on Sep 30, typical quarter-end spike (window-dressing by banks when they want to lower their cash balances on their balance sheet for regulatory purposes). RRPs have been between $1.4T and $1.5T since then. Yesterday at $1.49T.

    • Petunia says:

      Well, let us consider an extreme case. Fed lends out 1.6T in T’s and then breaks the swap by not returning the cash. If the govt simultaneously decides to stop paying interest on T’s, then the fed has cash and the counter parties have worthless paper.

      Extreme I know, because the govt and fed would never do this.

  21. Who knows? Everything is so different this time.
    But the Fed is usually more accurate in their inflation predictions than the private sector, and at least almost half want zero bound for another year or so.
    My opinion? LOL no clue and I like it that way, when everyone is or should be confused, trends are easy to exploit. Traders are lovin’ it.
    Sure, I’d rather see a more constructive economy but you trade what you see.

  22. Seneca’s Cliff says:

    Now is a good time to start your own 1 person ( or close family members) business. I used to have employees but for the last 10 years I have run my own 1 man machine shop. My employee based competitors are cranking up prices to pay higher wages while cutting back on output due to employee losses. My biggest problem now is listening to the customers beg and whine about wanting parts, it is kind of pathetic. I tell them to get used to it, we are now in a producer , not consumer based economy. Those who are part of the supply chain will make the rules from here on in.

    • 2banana says:

      Fyi.

      You should be cranking up prices too.

    • VintageVNvet says:

      Good move SC:
      Had 60, yes, sixty employees in ’81, none in ’82 and thereafter, relying on ”sub” contractors who were really easy to sort out due to contracts specifying performance parameters…
      Almost equal ”triple net”,,, and tons and tons less hassles, far damn shore!!!

  23. Djreef says:

    From the Philly Fed Business Outlook:

    Summary:

    Responses to the October Manufacturing Business Outlook Survey suggest continued expansion in regional manufacturing conditions this month. The indicator for current activity fell from its September reading, while the new orders index rose and the shipments index remained stable. The price indexes remain elevated and continue to suggest widespread increases in prices. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.

  24. Crush the Peasants! says:

    Thoughts on changes in real versus nominal wages?

    • Wolf Richter says:

      In September, CPI rose 0.4% from August; the average hourly wage rose 0.6%.

      Earlier this year, CPI rose faster than the average hourly wage; that changed in September.

      • Crush the Peasants! says:

        Thanks, Wolf! Let’s see if Labor gets a real gain.

        • Wolf Richter says:

          The point is that now we have another key element in the inflation cycle, and another data point about why inflation won’t be temporary. That’s the point of the article.

  25. Fewer jobless claims again. Hiring drivers and longshoreman 24/7 puts more pressure on a system in which rising wages and shortages converge. Can the National Guard unload ships? The Great Resignation is followed by the Great Consumer Boycott. Consumers sitting on their wallets are less inclined to migrate down the job chain. A debt slave revolt?

    • Tom S. says:

      American’s will die before they stop consuming. There’s a whole lot of credit card debt that can be racked up before the SHTF.

    • Trailer Trash says:

      “Can the National Guard unload ships?”

      No, unless they can operate and maintain very specialized cranes and other heavy equipment.

  26. wkevinw says:

    The dysfunction is that the labor issue is a supply problem hidden in the lack of labor force participation.

    There is an over-supply of labor if we had the same market structures as decades ago.

    Something will “break” and expose the dysfunction in the real economy- but I don’t know what or when.

    For now: it’s party on for the top 50% and continue to barely survive for the bottom 50%.

    Remember: Mr. J. Powell is on the record saying that the Fed actions do not impact income inequality, so there’s that.

  27. Agnes says:

    All of this may be true, but irrelevant.

    Grab a high school physics text book. There is only one difference between energy and work: energy bursts out in all directions and work is directed.

    Human cost of work is direction. The largest cost, energy, is from burning carbon fuels. The price of these fuels has doubled in the past few years from $42 to $82. In the 1990’s it was $10-15. The cost of human direction has been decreasing.

    Anyone believing that the cost of labor is going up because of lazy good-for-nothing low-class people, deserves to be hoodwinked by the power system.

  28. fred flintstone says:

    Fed to prohibit FOMC members from trading stocks……..what!!!
    No more speeches about rate policy toward the close of the markets to create a trading opportunity……..of course not……..the wife and kids will own the shares……..if not them……a blind trust that has ears.
    Do they really think anybody believes they are honest?

  29. Escierto says:

    Everyone’s favorite brand of toilet paper (USD) is getting pumped up again today. The PPT has been out in force pumping the dollar and using the fraudulent paper trades to push down commodities and metals. The country has been run by criminals for decades and yes I am including the Trump cabal.

  30. BuySome says:

    The plantation system is back and stronger than ever. It runs on very few owners and many levels of slaves who do their bidding. Even the small town merchants are at their mercy. Just keep staring at those plastic carrots while they exchange the switches for rechargeable tasers. Then, when they want the carts to move forward, the pulses will be delivered. And don’t be fooled…the bit will be in your mouth and the coin will come out of your ass…just more fertilizer for the boss to make his private treasury grow. Evil knows no borders.

  31. Winston says:

    Utility increases here just announced to take effect on Nov. 1. Transitory, of course. /s

    “Natural gas prices continue to rise globally. They’re now almost 100% higher than this time last year because of a combination of supply concerns and rising demand.”

    Residential:
    Electric 13.5%
    Natural Gas 26.8%

    Commercial:
    Electric 17.4%
    Natural Gas 32.9%

    Industrial
    Electric 20.2%
    Natural Gas 33.7%

  32. Michael Gorback says:

    Lots of wages, nobody willing to work for them.

    • Bobber says:

      Much of the problem is people retiring early in their 50’s and 60’s because of massive stock and RE price gains. As long as they have some conservatism built into their portfolios, they’ll never be back. The young folks, on the other hand, will be back because they have little savings and, hence, zero leverage. So half the problem goes away, half of it stays. Expect elevated inflation to continue.

      I read that a million people retired early last year, according to government data. That’s a lot of workers, most of them skilled.

  33. Auldyin says:

    “wages were on the rise for existing workers as well”
    0-1
    IMO, This is the one that will be decisive. These are the majority of jobs in a normal economy. All the other categories could be said to be potentially transient pending settlement to normal. If regular long term workers don’t get over the 5.6%-ish of inflation they are being screwed. No other way of saying it.
    John Deere is a classic pointer.

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